HEERACHAND GEMS PRIVATE LIMITED, MUMBAI V. ACIT 5(1)(2), MUMBAI

ITA 2490/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8032 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD
• Assessee Lawyers: DHAVAL SHAH LD ARS
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NO.2490/MUM/2018 HEERACHAND GEMS PRIVATE LIMITED ASSESSMENT YEAR: 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.2490/MUM/2018 ( / ASSESSMENT YEAR: 2009-10) HEERACHAND GEMS PVT.LTD. 102, B WING, THE CAPITAL G-BLOCK PLOT C-70 BANDRA KURLA COMPLEX MUMBAI-400 051. / VS. ASST. COMMISSIONER OF INCOME TAX-5(1)(2) AAYKAR BHAVAN 5 TH FLOOR, MUMBAI ./ ./PAN/GIR NO. AABCH-9958-C ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : DHARMESH SHAH & DHAVAL SHAH- LD.ARS REVENUE BY : MANOJ KUMAR SINGH-LD. DR / DATE OF HEARING : 13/11/2018 / DATE OF PRONOUNCEMENT : 02/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI [CIT(A)], APPEAL NO.CIT(A)-10/AC-5(1)(2)/331/16-17 DATED 21/03/2018 QUA CONFIRMATION OF CERTAIN ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ITA NO.2490/MUM/2018 HEERACHAND GEMS PRIVATE LIMITED ASSESSMENT YEAR: 2009-10 2 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5(1)(2 ), MUMBAI [AO] U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 ON 17/11/2016, WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN DETERMI NED AT RS.91.02 LACS AFTER CERTAIN ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR RS.67.83 LACS AS AGAINST ASSESSED INCOME OF RS.23.1 9 LACS U/S 143(3). DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING / TRADING OF GEMS, DIAMONDS & JEWELLERY. 2.1 THE REASSESSMENT PROCEEDINGS WERE INITIATED UPO N RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE MADE SUSPICIOUS PURCHASES OF RS.861.90 LAC S FROM FIVE ALLEGED HAWALA DEALERS , THE DETAILS OF WHICH HAVE BEEN EXTRACTED AT PARA 2 OF THE QUANTUM ASSESSMENT ORDER. CONSEQUENTLY, NOTI CE U/S 148 DATED 23/03/2016 WAS ISSUED TO THE ASSESSEE WHICH WAS FOL LOWED BY STATUTORY NOTICES U/S 143(2) & 142(1). THE REASONS RECORDED B Y REVENUE TO TRIGGER REASSESSMENT PROCEEDINGS WERE DULY SUPPLIED TO THE ASSESSEE. 2.2 THE AFORESAID ENTITIES WERE PART OF ONE RAJENDRA JAIN GROUP, WHO WAS SUBJECTED TO SEARCH OPERATIONS BY THE DEPARTMEN T ON 03/10/2013, WHEREIN IT WAS FOUND THAT THE SAID GROUP, THROUGH W EB OF NUMEROUS ENTITIES, WAS ENGAGED IN PROVIDING ACCOMMODATION EN TRIES OF BOGUS PURCHASE/SALES/LOANS & ADVANCES TO MANY PARTIES. TH E STATEMENT OF KEY PERSON NAMELY SHRI RAJENDRA JAIN & SHRI DHARMI CHAND JAIN WAS ALSO RECORDED DURING SEARCH OPERATIONS, THE RELEVANT PAR T OF WHICH HAS ALREADY BEEN EXTRACTED AT PARA 7.4 & 8 OF THE QUANTUM ORDER, THE PERUSAL OF WHICH REVEALED THAT THE ENTITIES OPERATED BY THE SAID GROUP WERE NOT ITA NO.2490/MUM/2018 HEERACHAND GEMS PRIVATE LIMITED ASSESSMENT YEAR: 2009-10 3 CARRYING OUT ANY GENUINE BUSINESS ACTIVITY AND WERE CARRYING OUT ONLY PAPER TRANSACTIONS AS PER THE REQUIREMENTS. 2.3 THE ASSESSEE DEFENDED THE PURCHASES VIDE SUBMIS SIONS DATED 17/11/2016 AND SUBMITTED THAT THE TRANSACTIONS WERE GENUINE, HOWEVER, FAILED TO PRODUCE ANY OF THE PARTY TO CONFIRM THE T RANSACTIONS WHICH LED THE LD. AO TO DOUBT THESE TRANSACTIONS IN THE LIGHT OF THE INVESTIGATION CARRIED OUT BY THE DEPARTMENT. 2.4 FINALLY, LD. AO, UPON CONSIDERATION OF FACTUAL MATRIX, CAME TO A CONCLUSION THAT THE ASSESSEE MADE THE ACTUAL PURCHA SES FROM THE GREY MARKET AND THERE WAS INFLATION OF PURCHASES IN THE BOOKS OF THE ASSESSEE WHICH REQUIRE ESTIMATION OF TRUE PROFITS. THE ESTIM ATION HAS BEEN DONE @12.5% OF THE ALLEGED BOGUS PURCHASES OUT OF WHICH ALLOWANCE OF GROSS PROFIT RATE OF 4.23% ALREADY DECLARED BY THE ASSESSEE WAS PROVIDED. IN OTHER WORDS, THE ASSESSEE WAS SADDLED WITH NET ADDITION @ 7.87% AMOUNTING TO RS.67.83 LACS AGAINST ALLEGED BOGUS PURCHASES OF RS.861.90 LACS. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME BEFOR E LD. CIT(A) WITHOUT ANY SUCCESS BY RAISING MULTIPLE CONTENTIONS WHEREIN THE STAND OF LD. AO GOT CONFIRMED. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUND S OF APPEAL AS WELL AS ADDITIONAL GROUNDS OF APPEAL CHALLENGING TH E VALIDITY OF REASSESSMENT PROCEEDING, HOWEVER, THE ONLY PLEA RAI SED DURING HEARING BEFORE US BY LD. AUHTORIZED REPRESENTATIVE FOR ASSE SSEE [AR], SHRI DHARMESH SHAH CONCERNS WITH FAIR ESTIMATION OF INCOME. THE ATTENT ION HAS BEEN DRAWN TO THE FACT THAT THE GOODS PURCHASED BY THE ASSESSEE ITA NO.2490/MUM/2018 HEERACHAND GEMS PRIVATE LIMITED ASSESSMENT YEAR: 2009-10 4 WERE NOT SUBJECTED TO VAT AND THE COMPLETE QUANTITATIVE DETAILS OF THE GOODS BEING DEALT BY THE ASSESSEE WERE AVAILABLE ON RECORD. OUR ATTENTION IS ALSO DRAWN TO THE FACT THAT THE STATEM ENTS MADE BY THE KEY PERSONS DURING SEARCH OPERATIONS HAVE SUBSEQUENTLY BEEN RETRACTED AND THEREFORE, THE ASSESSEE DESERVES FAIR ESTIMATION. T HE SAME HAS BEEN OPPOSED BY LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI MANOJ KUMAR SINGH WHO SUBMITTED THAT THE ESTIMATION WAS QUITE FAIR AN D JUSTIFIED UNDER THE CIRCUMSTANCES. 5. WE FIND THE ISSUE TO BE IN A VERY NARROW COMPASS . IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS ALREADY REFLECTED A GROSS PROFIT RATE OF 4.23%. THE COPIES OF PURCHASE INVOICES AS PLACED ON RECORD CONFIRM THE SUBMISSIONS OF LD. AR THAT THE GOODS PURCHASED BY T HE ASSESSEE WERE NOT SUBJECTED TO VALUE ADDED TAX [VAT] AND NO BENEFIT ACCRUED TO THE ASSESSEE ON THIS ACCOUNT. IT IS ALSO UNDISPUTED FAC T THAT THE ASSESSEE HAS RECONCILED QUANTITATIVE DETAILS OF THE GOODS BE ING DEALT WITH BY HIM TO A LARGE EXTENT. HOWEVER, AT THE SAME TIME, THE A SSESSEE REFLECTED PURCHASES FROM AS MANY AS FIVE ENTITIES, ALL OF WHI CH WERE BEING CONTROLLED BY THE AFORESAID TAINTED GROUP. THE SEAR CH / SURVEY ACTION ON THE SAID GROUP ON 03/10/2013 BY DGIT (INV.) REVEALED THAT THE SAID GROUP CONSISTING OF NUMEROUS BUSINESS ENTITIES WAS ENGAGED IN PROVIDING ACCOMMODATION PURCHASES BILLS WITHOUT CARRYING OUT ANY BUSINESS ACTIVITIES. THE ASSESSEE FAILED TO PRODUCE EVEN A SINGLE PARTY TO CONFIRM THE TRANSACTIONS. THEREFORE, IN SUCH A S CENARIO, THE ACTION OF LOWER AUTHORITIES IN ESTIMATING THE PROFIT ELEMENT WAS QUITE JUSTIFIED. HOWEVER, KEEPING IN VIEW THE FACT THAT THE VAT WAS NOT APPLICABLE ON THE PURCHASES MADE BY THE ASSESSEE AND VIEWING THE GROSS PROFIT RATE ITA NO.2490/MUM/2018 HEERACHAND GEMS PRIVATE LIMITED ASSESSMENT YEAR: 2009-10 5 OF 4.23% ALREADY DECLARED BY THE ASSESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE. KEEPING IN VIEW THE OVERALL FAC TUAL MATRIX, WE ESTIMATE THE IMPUGNED ADDITIONS ON NET BASIS @2% OF ALLEGED BOGUS PURCHASES OF RS.8,61,90,755/- WHICH COMES TO RS.17, 23,815/-. THE BALANCE ADDITION STANDS DELETED. 6. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JANUARY, 2019. SD/- SD/- (PAWAN SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/01/2019 SR.PS:- JAISY VARGHESE !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * +!$, , , , / DR, ITAT, MUMBAI 6. + -. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.